From the course: Digital Marketing Foundations

How to develop your digital marketing KPIs

From the course: Digital Marketing Foundations

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How to develop your digital marketing KPIs

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- Okay, you've set meaningful business focused goals, but how do you measure your progress along the way and ensure your day-to-day activities are actually pushing you towards those big goals? Well, that's where key performance indicators or KPIs come in. Think of your goals as your destination and your KPIs as the specific signposts and dashboard gauges that tell you if you're on the right track to get there. Every marketing activity you run, whether it's an email campaign, a social media push, or a series of online ads, needs to have its own set of KPIs that help you monitor its performance. The KPIs that you choose will always be unique to your business, your specific campaigns, and what you are trying to achieve. For example, if you're running an email campaign to sell coffee mugs, your KPIs might be the email open rate, the click through rate on the buy now button, and then the actual conversion rate, meaning how many people who clicked actually bought a mug. Now, while basic KPIs are important, modern marketers also rely on two sophisticated KPIs, engagement score and your LTV-to-CAC ratio. First, let's consider an engagement score. Instead of just counting likes, comments and shares separately on a social media post or a blog article, an engagement score combines these interactions into a single weighted metric. You might decide, for example, that a share or a save is worth more points than a simple like because it indicates a deeper level of interest or intent. So maybe a share is worth five points, a detailed comment three points, and a like one point. But here's where it gets really powerful. Your own data can then help you build this model. Look at your past content. If posts that typically get a certain number of shares, saves, deep comments, also lead to a measurable increase in website visits, leads, or sales. Well, then you start to understand the actual business value of each type of engagement, and this allows you to create a weighted engagement score that's truly meaningful for your business, essentially reflecting what drives actual results. Now, many social media analytic tools and marketing platforms can help you define and track these kinds of custom scores, or you can always build your own simple model in a spreadsheet. The second KPI I recommend is a critical one for understanding the financial health and sustainability of your marketing efforts. This is the LTV-to-CAC ratio. LTV stands for customer lifetime value. This is the total net profit that you expect to make from one average customer over the entire duration of their relationship with your business. And CAC stands for customer acquisition cost, and this is the total average cost that you spent to acquire that new customer in the first place. That would include your ad spend, your sales cost, and so on. So your LTV-to-CAC ratio tells you how much value a customer brings in compared to what it costs you to get them. For reference, a healthy ratio is often three to one or higher, which means that for every dollar you spend to acquire a customer, you eventually get $3 or more back in profit from them over their lifetime. If your ratio is one-to-one, well, you're breaking even on each customer or maybe even losing money if you haven't factored in all of the costs. This single KPI is crucial for knowing if your marketing engine is truly profitable and scalable in the long run. By focusing on advanced KPIs like these, you move beyond just surface level numbers and gain real insight.

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